<div><em>The extended repayment period and enhanced loan eligibility which comes at a cost, may not suit all home loan seekers but be suitable in extraordinary situations only, writes <strong>Sunil Dhawan</strong></em></div><div> </div><div>ICICI Bank has launched a new home loan product called ‘Extraa Home Loans’ that will allow borrowers to enhance their loan eligibility amount up to 20 per cent and also provide an option to extend the repayment period up to 67 years of age. Such home loans, however are for home value up to Rs 75 lakh thus catering to the affordable housing section of the real estate industry. The facility is currently offered in Greater Mumbai, National Capital Region, Bengaluru and Surat. </div><div> </div><div>The Loan matrix: Typically, home loans have a loan-to-value (LTV) of 80 per cent as set by RBI. So, on a property that costs Rs 75 lakh, the maximum loan could be for Rs 60 lakh. The actual sanctioned amount would however depend on borrower’s eligibility. The balance 20 percent i.e. Rs 15 lakh would be the down payment to be arranged by borrower. </div><div> </div><div>While sanctioning the loan amount, banks also take into account other loan liabilities that the borrower services through EMI. Also, income of the borrower determines the repaying capacity and thus the loan amount. This is typically around 40-45 per cent of the take-home income of the borrower. Also, even though there is no regulatory guideline, banks prefer keeping the loan tenure equal to the retirement age of the borrower which typically is 60.</div><div> </div><div>At times, eligibility of home loan gets restricted because of the income and age because of which the tenure and the loan amount gets restricted. </div><div> </div><div><strong>What’s extra: </strong>This product addresses these two points – one, it allows to enhance the eligibility of home loan amount and secondly increases the age for repayment. What is important is that the LTV still needs to be maintained. These are the three variants of ‘Extraa’.</div><div> </div><div><span style="color:#000000;">a</span><span style="color:#ff0000;">)<span class="Apple-tab-span" style="white-space:pre"> </span>For middle aged, salaried customers:</span> This variant is suitable for salaried borrowers up to 48 years of age. While in a regular home loan, the borrowers will get a repayment schedule till their age of retirement, with this facility they can extend their loan tenure till 65 years of age. </div><div> </div><div>b)<span class="Apple-tab-span" style="white-space:pre"> </span><span style="color:#ff0000;">For young, salaried customers:</span> The salaried borrowers up to 37 years of age are eligible to avail a 30 year home loan with repayment tenure till 67 years of age.</div><div> </div><div>c)<span class="Apple-tab-span" style="white-space:pre"> </span><span style="color:#ff0000;">Self-employed customers:</span> There are many self-employed customers who earn higher income in some months of the year, given the seasonality of the business they are in. This variant will take the borrower's higher seasonal income into account while sanctioning those loans.</div><div> </div><div><strong>What’s the cost:</strong> This enhancement of loan limit and the extension of age comes at a cost. The bank will charge a fee of 1-2 per cent of total loan amount as the loan guarantee is provided by India Mortgage Guarantee Corporation (IMGC). The risk of enhanced limit and of increasing the tenure essentially is taken over by IMGC. </div><div> </div><div><strong>What to do:</strong> Try to arrange the down payment as much as possible. Make sure you have exhausted all sources including friends, relatives for accumulating down payment. Try sticking within your budget while searching for home. This product could appeal to those who are either contemplating a house outside their budget or not able to arrange enough down payment. Also, property process have more or less become stagnant, try bargaining with builders for the home of your choice. An HDFC study few years back had shown that borrowers repay full outstanding at around 7 years. If that is the case, paying a fee to enhance limit and repayment period may not serve its purpose. </div><div> </div>
